Chapter 3: # 29, 34-36
29. a. AGI $65,000 Less: Itemized deductions (15,000)
Personal and dependency exemptions (6 × $3,900) (23,400) Taxable income $26,600
b. AGI $80,000 Less: Standard deduction (head of household) (8,950) Personal and dependency exemptions (4 × $3,900) (15,600) Taxable income $55,450
c. AGI $75,000 Less: Standard deduction (surviving spouse) (12,200) Personal and dependency exemptions (3 × $3,900) (11,700) Taxable income $51,100
d. AGI $58,000 Less: Itemized deductions (9,100) Personal and dependency exemptions (4 × $3,900) (15,600) Taxable income $33,300 e. AGI $64,000 Less: Itemized deductions (9,900) Personal and dependency exemptions (2 × $3,900) (7,800) Taxable income $46,300
p. 3-10 and Table 3.1
34. a. Four. Two personal and two dependency exemptions. Elton is a qualifying child, so his gross income does not matter. Trista is not a qualifying child—although a full-time student, she is not under age 24. However, Trista fits under the qualifying relative category. She passes the gross income test because the tuition portion of a scholarship is nontaxable. b. Two. One personal and one dependency exemption. Clint cannot qualify as a member of Audry’s household in the year of the divorce. Olive meets the relationship test. c. Three. One personal and two dependency exemptions. As Andy is a qualified child, he is not subject to the gross income test. Paige meets the gross income requirements of a qualifying relative. d. Two. One personal and one dependency exemption. Andy, as a qualifying child, is still immune from the gross income test. In a community property situation, however, Paige is treated as having $4,000 in gross income. Thus, she does not meet the gross income test and cannot be a qualifying relative. pp. 3-12 to 3-16 and 3-38
35. a. Three. The parents qualify as dependents under the Mexico/Canada exception. b. Two. Pablo’s father does not qualify as he is a citizen and a resident of Panama while his mother qualifies as a resident of the U.S. c. Three. The parents do qualify since they are U.S. citizens. d. Two. Under a special exception, an adopted child need not be a citizen or resident of the U.S. (or contiguous country) as long as his or her principal abode is with a U.S. citizen. p. 3-18 and Example 29
36. a. Four. The niece is in the qualifying child category. The cousin and son are not, due to the relationship and age tests. They both come within the qualifying relative category. b. Three. Both persons come within the qualifying relative category. The stepmother meets the relationship test, while the family friend’s son is a member of taxpayer’s household. c. One. Helena is not a qualifying child under the exception to the citizenship or residency test. Raul is not her adoptive father. d. Four. Two come under the qualifying relative category, and it has been assumed that each meets the gross income test. The mother- and brother-in-law satisfy the relationship test. While the ex-husband is a member of the household, he can qualify except in the year of the divorce. The brother-in-law’s age and non-student status have no bearing on the dependency issue. Example 29 and Concept Summary 3.1
Chapter 4: #38, 44
38. a. No. Actual receipt applies to the $120,000 ($10,000 x 12 months) she received in 2014. The $132,000 deferred income is not constructively received in 2014 because under the actual contract terms, she did not have the right to receive the income in 2014. The constructive receipt doctrine cannot change actual events to “what might have been done.”
b. Freda may have expected to be in a lower marginal tax bracket in 2015. She also benefited by not having to pay the tax on the income shifted into 2015 until she filed her 2015 income tax return or made payments on estimated taxes for 2015.
c. Yes. The $132,000 actually
